Acc201 Week 1 Assignment

inventory using the cost method and did not change the method used during the current

There are four accepted inventory methods: Specific Unit Cost, Average Cost, FIFO, and LIFO. Unique inventory items are recorded in inventory by the cost of that unit or specific unit cost. Non-unique items use one of the other 3 methods. The average-cost method is: average cost = cost of goods available / number of units available. The first-in, first-out (FIFO) method assigns the first costs into inventory to the first cost of goods sold. The last-in, first-out (LIFO) method assigns the last costs into inventory to the first cost of goods sold. Since inventory costs can vary, companies may choose an inventory method based on tax advantages. When prices are falling, FIFO will have the lowest taxable income. When prices are rising, LIFO has the lowest taxable

LIFO results in the matching of current costs with current revenues and produces higher quality earnings than either FIFO or average cost. Inventory accounting system used is described in the note that details accounting policies or the note that discusses inventory.

The predecessor literature about it is Accounting Research Bulletins (ARB) No.43 Chapter 4, paragraph 4 (Issued June, 1953) and Statement of Financial Accounting Standard (FAS) NO.151 Inventory cost- an amendment of ARB No.43, Chapter 4 (Issued November, 2004).

The inventory method that assigns the most recent costs to cost of goods sold is

Merchandising Inventory- These are items bought by the companies suppliers in order to keep stock.

In order for a company to succeed and be successful, it is very important for the company to understand the difference between profit and cost of goods. There are costing tools that can help a business figure out what the cost of product is during the manufacturing process. These tools are beneficial for a company to figure out how much profit can be made. These tools take the cost of manufacturing the unit and subtract it from the sale price of the product. Having this information, the profit per unit, is very beneficial for a company to know which products they should produce more heavily, or which ones to eliminate. I want to discuss two costing methods that are beneficial to a

First, LIFO is the method when organizations calculate inventory by assuming that they sell the latest stock first, so this method increase the current market rate of the value of sales and a closing inventory whose value is based on the prices that prevailed at the start of the year (Gapenski, & Pink, 2010). Organizations like this method because it reduces taxes by minimizing net profit when there is inflation. This method also could help organizations in maximizing their cash flow (Lewis, 2012). Second, the weighted average is a method that working in finding average value of goods at the beginning and end of the financial year and leading to an average cost of closing inventory and cost of sales. This method standardizes the value of goods, taxes, incomes, and cost of sales because of giving average values of all factors, so organizations determines an average cost of their units on hand and applies that average unit cost to the next sale to determine the cost of goods sold (Gapenski, & Pink, 2010) (Gordon, Raedy& Sannella, 2015). The last method is FIFO which is working on the company sells the oldest stock

I have chosen three different companies that use three different cost assumption methods just to get the full scale of each. K-Mart uses the FIFO (First in-First out) method, Sears Domestic uses LIFO (Last in-First out) and Sears Canada uses the Average Cost method. Benefits to each would be reporting higher income and real time current inventory cost for the FIFO cost assumption, Lower income taxes and real time income due to inflation for LIFO cost assumption, and Average Cost assumption is a good middle ground between the other two.

Inventory capacity can influence the company profits. Transformation in inventory will transform business proceeds. Since each item sold could possibly result in different prices, a costing strategy must be used. CVS Pharmacy was my merchant choice in in previous units. I would recommend that CVS use the Weighted Average Inventory Costing Method.

13. FIFO, weighted average, and LIFO methods are often used instead of specific identification for inventory valuation purposes. Compare these methods with the specific identification method, discussing the theoretical propriety of each method in the determination of income and asset valuation.

While operating a manufacturing company one can expect to encounter different types of methods of inventory costing. The four methods I will be discussing are, first in first out, last in first out, average cost methods, and specific identification method. I will also be discussing the pro and cons of utilizing each method.

the start of work in the Grinding Department. The Work in Process T-account for the Griding Department for May is given below: Work in Process-Grinding Department Inventory, May 1 Completed and transferred 21,800 ? Materials to the Mixing Department 133,400 Conversion 225,500 Inventory, May 31 ? The May 1 work in process inventory consisted of 18,000 pounds with $14,600 in materials cost and $7,200 in conversion cost. The May 1 work in process inventory was 100% complete with respect to materials and 30% complete with respect to conversion. During May, 167,000 pounds were started into production. The May 31 inventory consisted of 15,000 pounds that were 100% complete with respect to materials and 60% complete with respect to conversion. The company uses the weighted-average method to account for units and costs. Required a. Determine the equivalent units of production for May. b. Determine the costs per equivalent units for May. c. Determine the cost of the units completed and transferred to Mixing Department dusing May.

In a weighted average method the equivalent units of production for a department are the number of units transferred to the next department of finished goods plus the equivalent units in the department’s ending work in process inventory.